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Contrarian, growth at reasonable price, management change, cannabis stocks
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This is the 9th in a series of ideas where I contrast a cheap security with an expensive one that otherwise shares some characteristics. So far, I am 6 for 8:

BUY SELL
MPR NLC
13-Mar 7.30 11.99
28-Aug 9.78 17.52
34.0% 46.1% -6.1%
JNJ AGN
17-Apr 53.05 49.49
28-Aug 60.29 55.10
13.6% 11.3% 1.2%
COLM UA
1-May 30.36 24.00
28-Aug 39.94 24.30
31.6% 1.3% 15.2%
BCR ISRG
8-May 73.52 158.77
28-Aug 80.31 224.90
9.2% 41.7% -16.2%
EZPW AAN
5-Jun 13.09 32.85
28-Aug 13.46 26.64
2.8% -18.9% 10.9%
SCVL PSS
19-Jun 12.04 14.38
28-Aug 16.21 15.84
34.6% 10.2% 12.2%
HRL DIN
9-Jul 34.09 31.80
28-Aug 36.89 21.91
8.2% -31.1% 19.7%
AKAM NTAP
14-Aug 18.01 23.59
28-Aug 18.11 23.32
0.6% -1.1% 0.8%
Average: 4.7%

For reference:

  • 3/14: Buy Met-Pro (MPR), Sell Nalco Holding (NLC)
  • 4/18: Buy Johnson & Johnson (JNJ), Sell Allergan (AGN)
  • 5/3: Buy Columbia Sportswear (COLM), Sell UnderArmour (UA)
  • 5/10: Buy C.R. Bard (BCR), Sell Intuitive Surgical (ISRG)
  • 6/6: Buy EZCORP (EZPW), Sell Aaron's Rents (RNT)
  • 6/20: Buy Shoe Carnival (SCVL), Sell Collective Brands (PSS)
  • 7/9: Buy Hormel (HRL), Sell DineEquity (DIN)
  • 8/15: Buy Akamai (NASDAQ:AKAM), Sell NetApp (NASDAQ:NTAP)

Today's trade idea involves two companies that are both in my watchlist. I wrote positively about O'Reilly (NASDAQ:ORLY) last year, but it has almost doubled since then as the thesis has played out. I wrote about Dorman Products (NASDAQ:DORM), a major supplier to ORLY and other auto parts retailers, in February and then again in May. It had a huge run, and I sold the position. I added it back very recently in my Top 20 Model Portfolio and continue to like it here. Let's go to the tape:

DORM vs. ORLY

I probably shouldn't pick too much on ORLY, as I believe it was hit along with peers on the Cash for Clunkers program that took a small amount of potential customers off the road. I had been concerned that DORM was getting squeezed by its customers, but the last two reports tell me that pressure is abating. If ORLY works, DORM should work a lot better. DORM has a similar growth profile, a superior financial structure and a much lower valuation. My analysis doesn't include the off-balance sheet lease exposure of ORLY either.

Disclosure: Long DORM in a portfolio I manage

Source: Paired Trade: Buy Dorman Products, Sell O'Reilly Automotive